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Worrying trends for shopping centres and retailers

13 September 2017

The trend of people’s transactions with banks would seem to bode ill for many shopping centres and associated small businesses.

Look at the history of bank branches. A decade ago banks were closing branches to cut costs, often at considerable inconvenience to their customers. Now the initiative is with the customers. Transactional business with the big four banks is declining at the rate of about 10% annually as customers opt for electronic banking.

While people at shopping centres abound, they don’t in bank branches located in many centres.

Unless bank branches at these centres can be transformed for long-term viability, they will close. This is not good for shopping centres that once welcomed bank branches because their customers made a handsome contribution to foot traffic, and thus it’s also a concern for countless small businesses involved with these centres.

Some disquieting statistics

The Commonwealth Bank of Australia (CBA) reports that in 2007 it handled about $100m in deposits and withdrawals, now down to half that – and the decline has been accelerating in the past couple of years.

Some 26% of CBA’s retail product sales are now digital and that’s rising rapidly, which is why it and other banks are trying to transform surviving branches in attempts to secure their future.

It’s not a happy situation for strip shopping centres that for decades have regarded bank branches as big and reliable generators of foot traffic.

Much of Australia’s property investment is tied up in these centres along with the fate of countless business owners who lease shop and office space.

But the digital age is also a direct threat to bricks-and-mortar retailing generally, given the extent to which potential shoppers will avail themselves of other shopping options online.

It’s hardly a quantum leap for people who choose to do bank transactions online rather than at a bricks-and-mortar bank branch, also to elect to do much of their shopping online.

Using data to provide service

Savvy retailers, wherever they are operating, know that success depends not only on accommodating potential customers however they may choose to shop, but also on acquiring data that will enable this accommodation.

Australia’s retailers who are serious about their businesses have accumulated substantial data they’ve learned to cross-reference, but even those who have progressed to the next stage of being able to use cross-referenced data to refine their marketing techniques, few have managed this to the same level as many US retailers.

The behemoth, Amazon, currently considering an invasion of Australia, has developed data use to a level that could well be employed here.

Integral to Amazon’s marketing could be to persuade customers to enroll as “prime customers” who, on stipulated days – announced as a “Prime Day Australia” – would be recipients of a variety of cut price promotional offers every few minutes.

In a recent Prime Day US sale, most cut-price promotions were directed towards home, garden, and tool categories. Bunnings would seem a likely target in Australia, but Home Depot, the US equivalent, doesn’t seem to have been adversely affected by Amazon.

It‘s expected therefore that in Australia, Amazon won’t target enterprises as big as Bunnings but will instead aim at easier targets – in shopping centres for example.

Who’s in the line of fire?

Amazon’s Prime Day specials in the US have concentrated on electronics (including television sets), computers and office equipment, and this area is likely to be the focus of an attack on retailing in Australia.

While a battle with Harvey Norman, JB Hi-Fi and Office Works would seem of little worry to shopping centres, the Amazonians will also have clothing, footwear and health products in their sights. Shops selling these things have long been regarded as essential components of shopping centres.

So much for challenges now facing shopping centres and those who lease areas of these premises. But what of challenges in the immediate future?

Macks Advisory’s sources indicate that the next battle in the war being waged for domination in retailing will be on the voice communication front.

There have already been skirmishes in the US in this field that show every indication of developing into a national battle, thence to a world war bound to encompass Australia.

In a challenge to Google, Amazon has had a Prime Day in which it cut back prices of its Echo devices that enable people to issue verbal instructions to their computers. The eventual dominator of this market would be unassailable. This means war with Google, and what this could mean to retailing in Australia is anybody’s guess.

It’s vital for their survival that Australian businesses, irrespective of size or where they’re located, to update their use of technology constantly. And operators of SMEs should bear in mind that small, agile businesses can often deal with technological changes quicker and more easily than big ones.

Disclaimer: The information contained in this webpage is general information and does not constitute legal advice. Nothing in this webpage is or purports to be advice. If you do need advice, then you ought to seek and obtain appropriate personal professional advice based on your personal circumstance.

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